AIG earnings point to room for improvement-analysts


* Third-quarter operating earnings $0.96/share vs est. $0.94

* P&C combined ratio 101.6

* Shares down 3 pct in extended trading

Oct 31 (Reuters) - American International Group Inc reported earnings nearly in line with expectations on Thursday,but the stock fell after hours as analysts still saw room forimprovement in the insurer, which almost went under during thefinancial crisis.

AIG, which saw sour derivative bets threaten the company'sfuture five years ago, saw stronger commercial lines business.Analysts said they had expected better results in its consumerlines business.

The company also matched its 10-cent dividend of the secondquarter and said that it bought back $192 million in stock inthe three months ended Sept. 30.

AIG "is becoming a normal company," Sanford C. Bernstein &Co analyst Josh Stirling said.

"They're making great progress in fixing their underwritingin their commercial lines business, but still have more progressto make in consumer lines. They really need to get marginimprovements in both," he said.

Commercial underwriting saw net premiums earned edge down 2percent to $5.142 billion from the year-ago quarter, but thecombined ratio improved to 100.2 from 106.0.

A combined ratio below 100 indicates an underwriting profit,meaning an insurer is receiving more in premiums than it ispaying out in claims.

In its consumer underwriting, AIG saw a 6 percent dip in netpremiums earned to $3.27 billion. That combined ratio rose to99.9 from 98.8 in the third quarter of last year.

And the company also benefited from factors beyond itscontrol, such as a favorable tax rate, noted Meyer Shields ofKeefe, Bruyette & Woods, Inc.

"I think the stock's going to have a tough day tomorrow," hesaid.

BMO Capital Markets analyst Charles Sebaski pointed tostalled progress in the property and casualty unit.

"We did not see any meaningful improvement in the P&Cunderwriting," he said.

Net premiums earned in the company's property casualty unitfell 4 percent to $8.43 billion in the quarter ended Sept. 30,while the combined ratio improved 3.4 points to 101.6,indicating the business is still not booking an underwritingprofit.

Shares fell 0.62 percent in the Thursday session to close at51.65. Shares of the company fell 3 percent in after-hourstrading after the results.

The company's dividend in the second quarter was its firstsince receiving the first portion of a U.S. taxpayer-fundedbailout in 2008 that eventually topped $180 billion. AIGfinished paying back those funds early this year.

"We continue to remain optimistic about the future," ChiefExecutive Robert Benmosche said in a statement.

In a separate filing, the company said the sale of its ILFCaircraft leasing unit had not yet closed and that the sale couldstill be terminated.

"We continue to consider ILFC as a non-core business and weare continuing to pursue other options including an alternativesale or an initial public offering," the company said in thefiling.

The U.S. insurer's net income rose 17 percent to $2.17billion, or $1.46 per share, from $1.86 billion, or $1.13 pershare, a year earlier.

On an operating basis, the company earned $1.4 billion, or96 cents per share.

Analysts on average had expected earnings of 94 cents pershare, according to Thomson Reuters I/B/E/S.

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